Rima Abood v Chakib Carlo Gabrielle

Background

1. Chakib has described himself as a builder and architectural designer.
2. In about February 1999, Rima and Chakib acquired 5 Jellicoe Street (the house next door to the Property) with funds jointly borrowed by them from the National Australia Bank (NAB). They rented it out. Rima says that for the first 3 years after purchase she paid Chakib $1,100 in cash per month, which at her request was reduced to $1,000 and two years later to $700 per month. Rima says that Chakib frequently asked her to clean the houses when tenants left, and new ones moved in. She says she also cleaned other properties owned by Chakib at his request.
3. The Property was acquired also with mortgage finance from NAB.
4. On 25 July 2006, Chakib was made bankrupt on the basis of a judgment obtained against him by the Building Insurers' Guarantee Corporation in the District Court of New South Wales, and the second defendant was appointed his trustee in bankruptcy (the Trustee).
5. In November 2010, NAB sold 5 Jellicoe Street when it exercised its mortgagee's power of sale, for net proceeds of $523,442.00. This left a balance owing to NAB on the joint account of Chakib and Rima (secured over the Property) of $95,076.36 (the joint account).
6. On 24 December 2010, Chakib lodged a statement of affairs (the statement of affairs) in his bankruptcy. In it, Chakib disclosed co-ownership of the Property by him and Rima with no suggestion that her interest was not beneficial. No doubt recognising this difficulty standing in his way, from the bar table he said that he was advised by his legal advisers to do this, although the Property is owned by him. At the date of the statement of affairs, the amount owed on the joint account to NAB was $94,488.64. Chakib disclosed that the amount owed by him to creditors who held security over the Property was half of this, namely $47,244.32. The plain inference is that Rima was liable for the other half.
7. On 27 January 2011, the Federal Magistrates Court of Australia annulled the bankruptcy pursuant to s 153B(1) of the Bankruptcy Act 1966 (Cth): see Gabrielle v Palmer [2011] FMCA 44.
8. Not long after the annulment of Chakib's bankruptcy, on 2 March 2011, a total of $134,000 was transferred from the joint account. $100,000 went into a NAB "Choice Package" Home Loan account in the names of Chakib and Mary Gebrayel, with whom he apparently owned a property, and $34,000 went into a NAB Tailored Home Loan account in the names of Chakib and Stephen Anthony Odelli (the statement of affairs discloses joint ownership with Odelli of a house at 18 Redmond Parade, Belmore, NSW). According to Rima, Chakib insisted that she sign an authority in his favour to effect these transfers because he was being pressured by the bank to reduce his mortgages on other properties. Rima has no interest in the recipient accounts, and she received no benefit from the payments into them.
9. Interest on the amounts drawn on the joint account calculated from 8 November 2011 to 22 June 2022 totals $79,682.20. The amount drawn out by Chakib, plus interest attributed to it, is thus $213,682.20. The balance (taking into account monthly repayments of $2,405) in the joint account as at 28 February 2022 was $136,907.39.
10. Rima wishes the Property to be sold and has over the years made numerous requests of Chakib that this happen, but he refuses.
11. Rima gave evidence that in mid-2004, she had a conversation with Chakib in which she said she was getting married soon and wanted to have children so she was going to have to stop work and wanted the Property sold so she could get her share, or alternatively he should buy her out, to which Chakib replied that he did not want to sell and could not afford to buy her out. She also gave evidence that on one occasion when she asked for the Property to be sold, Chakib said it was not his problem but her husband's. She gave evidence that she asked him to sell so that she could get her share because she needed the money, that he replied that he would not sell until he was good and ready and that he wanted to do a development on the sites and when he was finished, he would give her an unencumbered townhouse. She also gave evidence of a conversation in 2015 when she asked for the money and he laughed and told her she was dreaming, that he only put her name down on the house because he felt sorry for her, that she was wasting her money, and that she had only put in $75,000 so that was all she was entitled to. She gave evidence of a conversation in mid-2017, in which she said to him, "you promised me an unencumbered town house, but that can't happen now that we have lost No 5, we can't do townhouses. I want half our equity in No 7". She says Chakib laughed and did not reply. She gave evidence of a "loud argument" in late 2017.
12. According to Rima, Dorry Dakkour, Rima's second cousin, currently lives at the Property and pays Chakib $2,000 as rent in cash every four weeks. Rima receives no part of this, but also does not make any financial contribution to expenses associated with the Property.
13. On 28 August 2020, through solicitors, Rima formally requested that the Property be sold and foreshadowed these proceedings if Chakib did not agree. Manifestly, Chakib did not agree.

History of the Proceedings

1. It is necessary to set out the history of the proceedings.
2. Rima initiated the proceedings by summons filed 21 August 2021. The summons and supporting affidavit were served on Chakib on 6 September 2021.
3. For reasons which are not entirely clear to me, Rima joined the Trustee as second defendant. Apparently (although this was not established by any evidence), there remain unpaid, costs, charges, expenses and remuneration in connection with the now annulled bankruptcy of Chakib. Section 154(1)(b) of the Bankruptcy Act 1966 (Cth) could have the effect that the Trustee may apply Chakib's interest in the Property in payment of such amounts. The Trustee lodged two caveats on the Property to secure these alleged claims. The caveats themselves are not in evidence. A title search of the Property identifies one simply as by the Trustee (apparently over the whole of the Property) and the other by the Trustee "as regards the share of Chakib Carlo Gabrielle".
4. On 31 August 2021, solicitors Peter M Wayne & Associates filed an appearance on behalf of the Trustee.
5. On 7 September 2021, Osbornes Solicitors filed an appearance on behalf of Chakib.
6. The summons was returnable in the Real Property List on 10 September 2021. It was adjourned by consent to 8 October 2021 after both Chakib and the Trustee requested an adjournment.
7. On 7 October 2021, the Real Property List Judge, Darke J, made consent orders requiring Chakib to file and serve any cross-summons or cross-claim by 12 November 2021. His Honour listed the matter for directions on 19 November 2021. Chakib did not file any cross-summons or cross-claim in accordance with these directions.
8. On 19 November 2021, his Honour extended the time for Chakib to file and serve his cross-summons or cross-claim to 30 November 2021 and stood the matter over for directions to 10 December 2021. Chakib did not file any cross-summons or cross-claim in accordance with these directions.
9. On 10 December 2021, his Honour directed Chakib to file and serve a cross-summons and serve evidence upon which he intended to rely by 28 January 2022, and Rima to serve any evidence in reply by 18 February 2022. His Honour listed the matter on 25 February 2022.
10. Chakib, through Osbornes, filed and served a cross-summons on 24 February 2022, but he served no evidence in accordance with the directions. He has never served any.
11. The cross-summons seeks a series of declarations, some in the alternative, mostly based, it seems, on an asserted agreement that Chakib and Rima would purchase two properties on Jellicoe Street, on the footing that on consideration of Chakib paying the deposit for the acquisition of both properties, developing them at his cost and constructing for the benefit of Rima a townhouse to buy at cost, she would become jointly and severally liable with him on any mortgage and would hold his interest in the properties on trust for his benefit. A significant problem is that he has never pleaded this case in a statement of cross-claim as he was directed.
12. Although Chakib asserted from the bar table that Rima made no contribution to the acquisition of the Property, the cross-summons asserts that she contributed "$168,951.71 which comprises 50% of the mortgage settlement amount on the Property". I also observe that the cross-summons makes the following claim in paragraph 15: 66G Application On the basis that the Court makes orders the subject of the Summons 16 August 2021 (Summons), a further order that: a. the balance of the proceeds of sale, be transferred by the 'Trustees' in the following proportions (being in accordance with the declaration at [7] above): i. Carlo 54.44% ii. Rima 45.56% b. Rima account, by way of contribution to Carlo, that share of the Mortgage which she was jointly and severally liable for and which Carlo paid.
13. On 25 February 2022, the matter came before Darke J once more. His Honour made the following orders: 1. Orders that the Cross-Summons proceedings continue on pleadings; 2. Directs that the cross-claimant file and serve a Statement of Cross-Claim by 18 March 2022; 3. Directs that the cross-defendant file and serve a Defence to Cross-Claim by 15 April 2022; 4. Removes the matter from the Real Property List; 5. Stands the matter over for directions in the Equity Registrar's List on 21 April 2022; 6. Grants liberty to restore on three days' notice.
14. Needless to say, Chakib has never served a statement of cross-claim.
15. On 19 April 2022, Osbornes filed and served a notice of intention to file a notice of ceasing to act. They formally ceased to act on 3 May 2022.
16. The matter came before Senior Deputy Registrar Hedge on 21 April 2022. Chakib appeared personally. The Deputy Registrar adjourned the matter to 6 June 2022 and extended the time for Chakib to file and serve his statement of cross-claim to 1 June 2022. No direction extending the time for him to serve his evidence was made. Chakib did not file and serve any statement of cross-claim by 1 June 2022 in accordance with these directions. The Deputy Registrar stood the matter over to 6 June 2022.
17. On 6 June 2022, the matter came before Registrar Walton. Counsel appeared for Rima and mentioned the matter on behalf of the Trustee. Chakib did not appear. The matter was referred to me for the allocation of a hearing date, and the Registrar ordered Rima to notify Chakib of this.
18. On 10 June 2022, I fixed the matter for hearing to commence on Friday 1 July 2022.
19. I directed that the hearing would be conducted remotely.
20. The hearing commenced at 10:00am on Friday 1 July 2022.
21. Rima was represented by Mr N Kulkarni of counsel. The Trustee was represented by Mr J Parrish of counsel.
22. Initially, there was no appearance for Chakib. However, after some time, he came on the line. He made an application for an adjournment, which was opposed by Rima and the Trustee. After a somewhat lengthy discussion, during which I think it is fair to say Chakib did the bulk of the talking (a significant portion of what he said being devoted to impeaching the terms of his own cross-summons), I declined to vacate the fixture. I now give my reasons for having done so. Each of the following reasons would on its own, in my view, have warranted refusal of the application. Their cumulative effect compelled it. 1. The proceedings had been on foot for almost a year. To have delayed the matter substantially would have been inimical to the overarching requirement in s 56(1) of the Civil Procedure Act 2005 (NSW) to try the real issues in the proceedings justly, quickly and cheaply. Section 66G proceedings should be dealt with expeditiously. I add that it is a matter of public knowledge that interest rates have recently begun to rise. Delaying the sale (if there is to be one) may result in the price obtainable for the Property being reduced, for which there will be no compensation to Rima if the proceedings were to succeed. 2. Chakib did not embrace the possibility of an adjournment for a few weeks. His position was that he needed months to retain lawyers and prepare. Justice did not dictate acceding to such an adjournment. 3. Chakib had every opportunity to put on his cross-claim and serve his evidence. It is to be borne in mind that the evidence pertinent to his opposition to the summons would inevitably have overlapped substantially if not entirely with his evidence on the cross-claim. 4. Chakib repeatedly failed to comply with directions of the Court. For the bulk of the period in which he was default, he was represented by solicitors. He asserted that he was never told of any of the directions and that his lawyers overcharged him. He said he is in dispute with Osbornes about their fees and complained that they had not released his documents. However, he has known at the least since 19 April 2022, when Osbornes filed notice of intention to cease to act, that they would not be acting for him. He appeared himself before the Deputy Registrar on 21 April 2022 when the time for him to serve a statement of claim was extended to 1 June 2022, but he still failed to comply. Rima bears no responsibility for these circumstances. 5. Having regard to Chakib's past behaviour in the proceedings, the Court could have no confidence that he would comply with any further directions timeously or indeed at all.
23. I observe that Chakib made it clear that he would not, immediately or within a short space of time, be able to meet an order for the payment of the costs thrown away by any adjournment. It is to be recognised, however, that if Rima succeeds, and there is sufficient equity in the Property (which it appears there may be), this prejudice would be simply one of delay in recovery. If she lost, the delay in recovery of any such costs would be exacerbated.
24. Having refused to vacate the fixture, I told Chakib that he had a right to cross-examine. He said he was not ready to do so. In my view, fairness dictated that he should have the weekend to prepare and to attempt to obtain documents which he said he needed but which he did not identify with any specificity. I stood the matter over to 2:00pm on 4 July 2022 for a live hearing.
25. Chakib cross-examined Rima aggressively and at length. I gave him significant latitude. He is plainly intelligent and articulate, albeit loquacious and combative. There is strong animus between them. Acknowledging Chakib's lack of expertise in cross-examining, I consider that Rima withstood the attack unscathed. He put to her various aspects in support of his general contention that she has no interest in the Property, with which she dealt rationally and satisfactorily. She denied that there was any agreement that she did not have a full half interest in the Property. When Chakib put to her that she did not make mortgage payments or pay other expenses, her response was that she also never received any rent, all of which Chakib took (and continues to take) in cash. She pointed out that she exerted herself physically to facilitate renting the Property out. She parried a suggestion that she would get an unencumbered townhouse after he developed the Property and the one next door with the response that he lost the property next door and the development was no longer possible. The cross-examination and her evidence generally exposed no reason not to accept her evidence and I accept it. Her position is corroborated by the statement of affairs and, in some respects, by the terms of Chakib's own cross-summons (although it should be said that he endeavoured to distance himself from the terms of that instrument).

The Law

1. An order under s 66G of the Act is discretionary but is almost as of right. An order may be refused, however, on settled principles, if it would be inequitable to make it, for example, if to make the order would be inconsistent with a proprietary right, or the applicant for the order is acting in breach of contract or fiduciary duty or is estopped from seeking or obtaining the order. Hardship or general unfairness does not warrant refusal: Foundas v Arambatzis [2020] NSWCA 47 at [63] (per White JA, Bell P and Basten JA agreeing).

Consideration

1. There is no basis here for a finding that it would be inequitable to make the order Rima seeks. Chakib has established no basis to make it so. She is a co-owner of the Property and he has failed to establish any proprietary right, contract, fiduciary duty or estoppel inconsistent with her entitlement to the order.
2. Rima argues that Chakib must bear responsibility for the amount $134,000 drawn down from the joint account, plus the interest debited to the account as a consequence of the drawdown.
3. I uphold this submission. The amount was taken entirely for Chakib's benefit and should be the subject of an adjustment: see Segal v Barel (2013) 84 NSWLR 193 at [109]-[114] and [132]; Barel v Segal (No 2) [2012] NSWSC 1054 at [30]-[34]; Chamberlain (as liquidator of Gerard Cassegrain and Co Pty Ltd (in liq)) v Cassegrain [2015] NSWSC 1838 at [76]-[78]).
4. In paragraph 4 of an affidavit dated 2 June 2022, Emily Leigh Lane, a solicitor employed by Rima's solicitors, makes the following statement: I estimate that in dealing with 6 adjournments of these proceedings (including seeking updates from the First-Defendant's solicitors as to progress with filing documents, liaising with those solicitors in relation to upcoming directions hearings, arranging appearances before the Court, updating our client as to outcomes, etc.) and the lead up to the directions hearing on 6 June 2022, the Plaintiff has incurred additional costs of $5,478.00 inclusive of GST and counsel's fees.
5. Rima argues that Chakib should also bear responsibility for the amount of $5,748 estimated to have been incurred in dealing with six adjournments. The difficulty with this submission is that Rima's evidence amounts to no more than an estimate, without any supporting material. The evidence is not sufficiently precise to enable the Court properly to require Chakib to pay the estimated amount. He should pay Rima's costs (except for those which she would have incurred in any event had he not defended the proceedings), but they must be taxed or agreed. Plainly, he should pay the costs of and incidental to the directions hearings when he was in default of the Court's directions.
6. Rima further argues that, contrary to the usual position that the costs of both parties with respect of an application such as this are paid out of the proceeds of sale, Chakib should bear his own costs because his claims are "directly contradicted by the statement of affairs", he does not want to sell the Property despite being aware of Rima's need to sell and it should be inferred that his actions have been calculated to delay and frustrate the proceeding.
7. In my view, Chakib's conduct of the proceedings has been such that the only costs incurred by him which should be paid out of the proceeds for sale are the costs incurred by him in connection with the s 66G application that would have been incurred had he not opposed it. He must of course bear his own costs of the cross-summons.
8. At this point, it is appropriate and necessary to say something about the conduct of the Trustee.
9. The Trustee supported the grant of the relief sought by Rima. The basis for his participation, as articulated by counsel, was because he was cited as a defendant and as a cross-defendant and, in effect, needed to protect his position with respect to outstanding fees, expenses and remuneration from the bankruptcy administration, which purpose would be served by the Property being sold. However, he made no claim for any such amount in these proceedings and did not establish that he is owed any money in connection with Chakib's bankruptcy administration. He did not seek any order that a specific amount be paid into Court if the Property was ordered to be sold. His initial position was that Chakib should bear his costs of participating in these proceedings.
10. In my view, the Trustee had no legitimate interest in taking an active role in these proceedings, let alone supporting Rima against Chakib. Indeed, if the cross-claim were to have been prosecuted and succeeded, notionally, at least, the extent of the Property which vested in him (for the benefit of Chakib - there being no unsatisfied creditors) may have been increased, except that it would not have been in liquid form. I infer that he took the position of supporting her because the outcome she seeks will generate cash in the hands of Chakib which may be utilised to pay himself. In my opinion, it was no part of his function to act adversely to the interests of Chakib, or for that matter, in support of Rima for that purpose.
11. There are no other creditors in the erstwhile bankrupt administration and partisan participation in a dispute between the erstwhile bankrupt and a third-party concerning property jointly owned by them so as to so serve the purpose only of enhancing his prospects of recovery of outstanding fees in the erstwhile administration was inappropriate.
12. Ultimately, the Court having raised these difficulties with counsel, the Trustee properly abandoned any submission that Chakib should bear any part of his costs. The Trustee should bear his own.
13. At the conclusion of the hearing, the Trustee consented to the removal of the caveats if the order sought by Rima is made. I do not propose to make such an order. As to any caveat affecting Chakib's undivided half-share, the terms of s 66G(1) of the Act make it clear that the Property will be vested in the trustees for sale free from incumbrances affecting that share. As to any caveat affecting the entirety of the Property, the Trustee is, of course, at liberty to withdraw it at any time. It may be prudent to do so.
14. Appropriately qualified trustees for sale have consented to accept the role.

Conclusion

1. Chakib's cross-summons is dismissed.
2. I make the following orders: 1. Sean Magnus Wengel and Michael Craig Brereton, both of William Buck of Level 29, 66 Goulburn Street, Sydney (Trustees for sale) are appointed trustees of the Property situated at 7 Jellicoe Street, Condell Park NSW, being the whole of the land contained in folio identifier 151/8700 (the Property), pursuant to section 66G(1) of the Conveyancing Act 1919 (NSW). 2. The Property vests in the Trustees for sale subject to any incumbrances affecting the entirety thereof but free from any incumbrances affecting any undivided share or shares therein upon the statutory trust for sale under Division 6 of Part 4 of the Conveyancing Act 1919 (NSW). 3. The Trustees for sale are to pay out of the proceeds of sale of the Property: 1. council rates, water rates and other statutory duties or charges, if any, in respect of the Property; 2. real estate agent's commission and charges, legal fees and any other costs or expenses incidental to the sale of the Property; 3. the amount owing to National Australia Bank secured by mortgage 8546783P; 4. the reasonable fees and costs for the Trustees for sale; 5. such of the plaintiff's costs of the proceedings as would have been incurred had the first defendant not opposed the making of an order under s 66G(1) of the Conveyancing Act 1919 (NSW); and 6. such of the first defendant's costs of the proceedings as would have been incurred had he not opposed the making of an order under s 66G(1) of the Conveyancing Act 1919 (NSW). 1. The net proceeds of sale remaining after all such payments have been made are to be distributed as follows: 1. payment to the plaintiff of 50%; plus 2. payment to the plaintiff of $213,682.20; plus 3. payment to the plaintiff of her costs of the proceedings less the amount received under Order 3(e); and 4. payment to the first defendant of the balance. 1. The Cross-Summons is dismissed. 2. Grant liberty to the parties and to the Trustees for sale to apply to the Court on seven days' notice for such further orders as may be necessary to give effect to these orders.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 08 July 2022